Net neutrality’s demise: In U.S. and Canada, regulators look at changing rules by Christine Dobby

Apr 25, 2014

Source: National Post

The poster child for the last showdown over the open Internet in Canada was the online gamer. This time it could be a much broader swath of the population as the battleground turns to anyone who streams YouTube videos or catches up on Netflix shows on their smartphone.

As U.S. authorities prepare to rewrite laws around net neutrality – the principle that a byte is a byte and all content should be treated equally – Canada’s own rules on Internet traffic are facing a crucial test.

The Canadian Radio-television and Telecommunications Commission is considering an application regarding three mobile television apps, all of which let customers access television content from services affiliated with their cellphone provider subject to a partial exemption from data caps.

While the challenge extends into issues beyond net neutrality, some say the commission’s decision in this case could provide a sense of the extent to which Canada’s Internet and wireless providers can use those pipes to promote their own content businesses.

Those involved will undoubtedly be watching events south of the border as the U.S. Federal Communications Commission prepares to unveil proposed Internet rules that will allow providers to give preferential treatment to traffic from content providers.

The FCC proposal comes after it suffered a stinging defeat in January when a federal appeals court struck down rules on net neutrality that restricted Internet providers from treating traffic from any source of content differently than another.

In the wake of that decision, companies that produce content and those that supply broadband Internet began considering mutually beneficial arrangements. Comcast Corp. notably struck a deal with Netflix Inc. to offer better-quality streaming for its online video service.

The FCC appears set to give such deals a pass with its new rules — which reports suggest will be made public next month — provided the details are disclosed and the terms are “commercially reasonable.”

The CRTC introduced a policy around Internet traffic management practices in 2009 that requires Internet providers to clearly disclose any practices they employ to manage traffic, which must also be designed to meet a specific need and cannot give the provider itself preferential treatment.

The commission used the framework in 2012 to shut down Rogers Communications Inc.’s alleged practice of “throttling” or slowing down speeds for online gamers. The company said it would stop “traffic shaping” designed to ease congestion on its network, following a similar commitment made by BCE Inc. the year before.

That CRTC policy as well as broader considerations under the country’s telecom and broadcast rules are likely to come under play as the commission considers the mobile TV complaint.

The application began with a challenge last November to BCE’s Mobile TV app, which lets Bell Mobility subscribers access 30 live and 14 on-demand television channels from their mobile device for $5 per month. Here’s the key issue: the 10 hours per month of viewing included with the service do not count against the user’s data cap on their phone plan.

Ben Klass, a graduate student at the University of Manitoba who filed the complaint, argued that the app gives Bell’s own service a preference over other over-the-top (OTT) services such as Netflix, which cost subscribers more to watch because they are not exempt from the data cap.

In January, the CRTC combined the application with two other complaints filed by the Public Interest Advocacy Centre about similar apps from Rogers Communications Inc. and Quebecor Inc.-owned Videotron.

“This case will provide us with some sort of sense of what the CRTC is thinking,” said Michael Geist, who holds the Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa.

He noted that since the last big public debate over Internet traffic management, both the business models and the CRTC commissioner have changed.

Jean-Pierre Blais, who has been chair of the regulator for just under two years, has forged a pro-consumer path with initiatives such as the national wireless code and the current review of the Canadian television system.

Netflix and other online video-streaming options have also become a greater threat to conventional television providers. A survey commissioned by the CRTC and published Thursday found 39% of Canadians use Netflix or similar services. The commission also said Thursday that preliminary 2013 data indicates the number of traditional television subscribers declined for the first time last year. Canadian media companies, many of which also own telecommunications businesses, have begun creating their own OTT services to let customers watch video online on multiple devices.

BCE argues that the Internet traffic management policy doesn’t apply to its Mobile TV product, which it says is a broadcaster and therefore not governed by telecommunications rules that apply to Internet access. It also says the service, which had 1.2 million subscribers as of the fourth quarter of 2013, doesn’t favour content produced by its Bell Media division.

“If you look at the range of programming, it’s clear we don’t grant a preference to any particular service,” spokesman Mark Langton said. “We have over 40 channels from a range of broadcasters, including Bell Media, CBC, Rogers and Videotron and various Canadian independents.”

For its part, Rogers says mobile television is in its infancy and its Anyplace TV app was designed to encourage customers to try the service and get comfortable accessing video content over the wireless network.

“We don’t agree that this service, or similar services offered by our competitors, are harming the highly competitive OTT market that’s dominated by global companies with millions of Canadian subscribers,” said Ken Engelhart, senior vice-president of regulatory affairs at Rogers. “No data is given preferential treatment in the wireless network, whether it’s a [Rogers Anyplace TV] stream, a Netflix stream, or a file download.”

He added that carriers offering mobile video content means more Canadian programming than would otherwise be available through services such as Netflix.

“We need the ability to experiment and develop solutions that will give customers a reason to try these new platforms and remain a part of the regulated system,” Mr. Engelhart said.

Videotron, whose illico mobile application is also a subject of the complaint, did not respond to requests for comment on this story.

Geoff White, counsel for PIAC, argues that whether the mobile TV apps run afoul of the Internet traffic management policy or not, they violate broadcasting and telecommunications rules by favouring one customer over another. He says choosing to use a competing OTT service such as Netflix that is subject to data caps means customers would pay much higher rates leaving them with little practical choice in the market.

“The combined proceeding is ultimately about whether the current rules allow wireless carriers to discount their wireless data rates for their subscribers when watching their affiliated over-the-top service,” he said, “The proceeding certainly implicates net neutrality and highlights problems with vertical integration…. But the fundamental concern from PIAC’s perspective is access to competitive alternatives.”

The three companies were required to file responses by Friday to a list of questions from the CRTC about the economics of the apps, how they affect what customers pay and how traffic to the apps is managed. Further replies from the parties and intervenors are due in May.